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Private Money Lending Blog

Corey Curwick Dutton

By Corey Curwick | Mortgage Broker
or Lender in Salt Lake City, UT

New Banking Standards May Put Community Banks Out of Business

The new Basel III banking standards will require banks to hold more capital and may devastate local and community banks. Banks are expected to comply by 2019, which means most of them will have to deleverage their balance sheets and revamp their operational standards. For smaller, community banks this proposal will be extremely costly to implement and many say it will seriously hurt lending. For banks, small or large, these new capital reserve requirements mean that they will have to make less loans and tighten lending even more. This seems very grim for consumers and businesses alike, which both depend on local and community banks for badly needed credit.

Community banks are fighting this, as they feel they are being unfairly punished for the problems caused by the large banks in the U.S.

Greg Krider, Senior vice president of First State Bank of Middlebury in Indiana, was quoted: "We feel very strongly that the proposed rules could have dire consequences for community banks across the country, and would be detrimental to the economic recovery of our nation."

With banks being forced to get loans off their balance sheets over the next several years, this is good news for private money lenders who will have to fill the gap in lending. While smaller banks will struggle to comply with these standards and tighten the screws down on lending, private money and hard money lenders will inevitably step up and make loans to both consumers and business owners to keep the economy liquid.

Posted by Corey Curwick Dutton on November 1, 2012 from Private Money Utah. To learn more about using hard money loans to finance your real estate purchases, check out our ‘Hard Money 101’ by clicking here: http://privatemoneyutah.com/hard-money-101/

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